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Wednesday, May 11, 2011

Only three weeks have passed since the Supreme Court’s decision in AT&T Mobility v. Concepcion gave corporations a license to steal from the public.

As American Lawyer (subscription required) reports, that has proven to be plenty of time for corporations to rush to court and use the decision as a basis for throwing out lawsuits by consumers who claim that the corporations cheated them out of money.

In AT&T Mobility, the Supreme Court handed corporations a sweeping legal victory by allowing them to write clauses into the fine print of contracts that force consumers to give up their right to enter into class arbitration or litigation.

Arbitrating or suing as a class is essential to holding corporations accountable for wrongdoing because few people will arbitrate or sue as individuals if the corporation has wrongfully taken from them a relatively small amount of money. As a result, contract clauses that forbid class actions virtually guarantee that a corporation that steals a small amount of money from many people will escape justice.

In one example of AT&T Mobility’s effects, U.S. Bancorp moved in a San Francisco federal court to compel plaintiff consumers to arbitrate a dispute about overdraft fees. Plaintiffs claimed in their lawsuit that U.S. Bancorp wrongfully collected fees after automatically deducting automobile loan payments from checking accounts with insufficient funds. The AT&T Mobility ruling could prevent the plaintiffs’ class action suit from going forward, which would ensure that almost none of them would spend time and resources on individual arbitration.

The new power that the Corporate Court has granted to corporations may also extend to homeowners facing foreclosure. As ProPublica has reported, banks are increasingly writing language into the fine print of contracts that force homeowners to waive their rights to sue or fight foreclosure. The report identified eight banks and other mortgage servicers that target individuals facing foreclosure and include waivers of rights. As borrower attorneys noted in the article, “if a homeowner signs away their right to sue, they might be forfeiting the best leverage they have to get a lasting solution” to their financial difficulties. AT&T Mobility will encourage more banks and mortgage companies to take advantage of people struggling to keep their homes by using fine print to strip them of their legal rights.

The first three weeks under the Corporate Court’s AT&T Mobility regime demonstrate that the repercussions for everyday Americans are likely to be devastating for years to come if Congress fails to undo the decision and restore the balance of power between individuals and corporations.